Temporary workers
Many employers obtain temporary workers from staffing agencies. That's perfectly okay, so long as the agency is properly compensating them, paying payroll taxes and withholding FICA and federal income taxes from their wages. If the agency does not do that, the receiving employer may be held responsible. The same is true for overtime compensation because the receiving employer is likely a "joint employer" with the staffing agency. Therefore retailers should review the agreements they have with staffing agencies and be sure that the agencies are handling payroll matters properly.

Employers using agency workers should also check the language of their benefit plans to be sure that agency workers are not covered. Even if the employer does not regard agency workers to be employees, if the eligibility language of the formal plan documents is not precise, the workers may legally be entitled to those benefits.

Independent contractors
Just calling a worker an "independent contractor" does not make it so. Many so-called independent contractors are really employees, entitled to protection under a variety of employment laws, such as minimum wage and overtime compensation laws, nondiscrimination laws and labor laws — not to mention payroll taxes and withholding.

Although the legal definitions for independent contractors vary from one law to another, the basic idea is that if an employer controls the manner and means by which the work is done, as opposed simply to the end result, the worker is likely an employee, no matter what characterization the parties use. Also, some workers who in fact meet the IRS test of independent contractors are still considered employees for state unemployment and worker compensation payroll taxes.

State and federal tax authorities routinely audit employers for compliance, assessing back taxes and penalties for noncompliance. In addition, if an independent contractor is injured on the premises, the employer may be liable for the injuries, whereas most employee injuries are covered by worker's compensation. Therefore it pays to be sure that workers treated as independent contractors really are.

Unpaid interns and trainees
Well publicized lawsuits are being filed by unpaid interns claiming protection under the wage and hour laws as employees. As a matter of fact, it is very difficult for a private-sector employer to legally have unpaid workers, whether they are called interns or trainees, although many employers do not understand this. The U.S. Department of Labor has very stringent requirements for unpaid interns/trainees. The result is that if a person is doing work for a private employer, he or she is probably an employee who must be paid at least minimum wage and overtime pay and who may also be entitled to participate in the employer's benefit plans.

Off-the-clock work
Employees must be paid for all time worked, even if it is before they clock in or after they clock out. Common types of off-the-clock work include:

Depending on the circumstances each of these activities may constitute work that must be paid for, perhaps at overtime rates.
Employees must be paid for overtime work even if they did not get permission to work it, so long as the employer knew of the work or was on "notice" of it. The fact that the employee violated instructions not to work overtime may not be a defense.

Finally, if employees are working off-the-clock, the employer has an additional problem: it's not complying with its record keeping obligations. The absence of accurate records makes it much easier for employees to pursue wage claims.

Meal and rest breaks
Many states have stringent requirements for meal and rest breaks. Some have penalties for noncompliance; others simply require additional pay if the breaks are not taken. When employees are scheduled to work full time, the pay for missed breaks may be at overtime rates.

Seating requirements
Some states require employers to provide suitable seating for employees. In those states, additional seating may be required for the holidays due to increased staffing.

Costs of uniforms
If employees are required to wear special clothing, there are at least two potential ramifications. Under federal law, if employees are required to pay for and maintain special clothing, the cost may be considered a reduction of their wages — which may result in minimum wage violations. Some states make employers pay for and maintain special clothing at no cost to the employee.

Workplace safety
Workplace safety laws protect all employees. Some state laws require safety orientation and training before newly hired employees are assigned to work. Failing to do that exposes the employer to citations and penalties — especially if a new employee is injured due to lack of training. All employees are protected by safety and health laws dealing with exposure to hazardous chemicals, and these laws apply even to ordinary household chemicals if the employee has a greater exposure to them than he or she would have at home.

Overtime exemptions
Misclassifying employees as exempt from overtime pay is a widespread problem due, in large part, to common misconceptions. For example, just because someone is paid a salary does not mean that he or she is exempt. Also, outside sales people may be exempt from overtime requirements, but merchandisers typically are not. Similarly, although some retail commissioned sales people may be exempt, most inside sales employees are not.

The wage-hour laws of some states are far more demanding than federal laws. For example, in California store managers and assistant store managers are not exempt if they spend more than 50% of their time on non-exempt work. During the holiday season, it's pretty easy to exceed that threshold.

The bottom line
The wage-hour laws are not suspended during the holiday season. If an employer has any questions about them, it's good to ask for advice — in advance.

Bruce M. Cross is a partner in the Labor & Employment practice of law firm Perkins Coie LLP, in the Seattle office. He has extensive experience representing companies throughout the country, including those in the retail sector, on a variety of labor and employment issues. Cross can be reached at BCross@perkinscoie.com.

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